Our credit score is often the difference in getting a loan approved or not. It can also be the difference in landing our dream apartment, or having to settle for one that's less desirable. Or even being considered for some jobs. It's important to know how to fix credit mistakes and avoid them. This article will 12 the most common mistakes in credit and give practical tips to correct them.
Maxing Out Credit Cards
Maximizing your credit card limit can have a major impact on your rating. Keep your credit usage rate under 30% of the total credit limit.
Neglecting Your Credit Score
Ignoring your score can have a negative impact. Regularly checking your score can help you identify areas for improvement and track your progress.
In default on Loans
Your credit score can be severely affected by defaulting on a debt. Reach out to your lender to discuss repayment options if you're struggling to make payments.
Late Payments
Late payments can damage your credit rating. Payments that are late can remain on your credit reports for up to 7 years. Set up automatic payments to pay on-time.
Credit Repair Scams to Avoid
Credit repair scams might be tempting, however they are often expensive and produce little to nothing. You can avoid these scams by working directly with credit repair agencies, or improving your score yourself.
What to do if you are a co-signer without a plan
You can find yourself in a tough financial situation if you are a cosigner with no plan. Before co-signing a loan, have a plan in place for how you'll handle payments if the primary borrower defaults.
Why You Should Never Check Your Credit Report
You should review your credit report on a regular basis to make sure there are no mistakes or fraudulent activities. You can access your credit report for free once a year from each of the three major credit bureaus.
Failing to Communicate with Lenders
Failure to communicate with lenders can result in missed payments and damage to your credit. Reach out to your lenders if you're struggling to make payments.
Using Payday Loans
Using payday loans can be a costly mistake. These loans often come with high-interest rates and fees, which can spiral out of control quickly.
The Problem of Too Many Cards
Too many credit cards may lead to excessive spending and missed payments. Limit the number of credit cards you have.
Retail Store Credit Cards: How to Apply
Applying for retail store credit cards can be tempting, but these cards often come with high-interest rates and fees. Consider carefully whether you want to apply for this type of credit card.
You can't get too much credit at once
Multiple credit applications in a short period of time may damage your credit rating. Avoid this mistake by spreading out your credit application.
Avoiding these credit mistakes, and improving your credit score can help you improve your financial standing. This will not only help you qualify to receive loans with better interest rates but also improve your financial health.
The Most Frequently Asked Questions
What is an excellent credit score?
A good credit score is typically considered to be 700 or above.
How often do I need to check my credit score?
It is recommended that you review your credit history at least one time a year.
Paying off a loan before the due date can hurt your credit score.
By reducing your credit usage rate, you can improve your credit score and show lenders that your are responsible with credit.
Can I improve my credit score quickly?
While it takes some time to improve credit scores, there are things you can do right away that will show results. For example, paying off your debts or fixing any errors in your credit report.
What should I do if I find an error on my credit report?
If you find an error on your credit report, you should dispute it with the credit bureau reporting the error and the lender that provided the inaccurate information.